The sluggish performance of Bitcoin in recent months may have less to do with fading demand and more to do with U.S. government cash management, according to Raoul Pal of Global Macro Investor.

Pal points to the Treasury General Account – Washington’s operating fund at the Federal Reserve – as the hidden force that drained liquidity from risk assets through the summer.

Since July, the Treasury has issued roughly $500 billion in bonds to refill the account, lifting its balance to around $800 billion. That supply shock, he argues, temporarily sapped energy from markets, with crypto feeling the impact most acutely.

The pause came at an awkward time for chart-watchers. Bitcoin has historically tracked shifts in global M2 money supply with a lag of about 12 weeks, a relationship that had even suggested a path toward $200,000 by late 2025.

Instead, as M2 expanded, BTC moved sideways, leading some to question whether the model had broken.

Pal disagrees. He believes the disruption was temporary and that, with the Treasury now holding enough reserves, the liquidity squeeze will fade by the end of this month. If that plays out, he expects Bitcoin to reconnect with its monetary backdrop and resume the broader uptrend implied by the M2 model.

In his view, the summer slump was not the death of the correlation, but proof of how sensitive crypto remains to sudden policy-driven shifts in dollar liquidity.